Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 20, 2011

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For home mortgage holders who are making payments that are too high for their income, there are options that allow the borrower to change that monthly payment to make it more affordable. This process is called loan modification, and the Obama Administration’s new Making Home Affordable Program is one way that borrowers can find this kind of financial relief.

The program offers many ways to ease the burden of high mortgage loan payments, including ways to help salvage an “underwater” mortgage – when the value of home has decreased significantly– and aid for homeowners who have become unemployed.

A final option the program offers is refinancing or modifying the home mortgage, changing the monthly payment. There are four paths by which to proceed with this option. The first is the Home Affordable Modification Program (HAMP), which scales down the monthly payment to 31 percent of the borrower’s pre-tax monthly income – often meaning a discount of $1,000 or more.

A second option is the Principal Reduction Alternative (PRA), which works to reduce the amount a borrower owes on the home, especially if he or she owes more than the home is currently worth. A third option is the Second Lien Modification Program (2MP), which allows the borrower to receive a modification on their second mortgage for a property. This may also apply to a home equity loan or home equity line of credit.

A final option is the Home Affordable Refinance Program (HARP), which allows the borrower to refinance a home that has gone down in value and thus was not approved for a traditional refinance. These options under Obama’s plan are not the only options for refinance or loan modification, with private lenders offering many similar services.